The bull case for EOS is, in the most simple terms, that it will take market share from Ethereum.

How and why might that happen?

Block.one, the company that’s building the EOS software, excels in a few areas in which the Ethereum Foundation is lacking. They are:

Scalability and performance

Focus on consumer usability

Go-to-market focus

The Bull Case: Scalability

As I wrote about in Models For Scaling Trustless Computation, the Ethereum Foundation has prioritized decentralization at the expense of scalability. On the other hand, Block.one has prioritized scalability at the expense of decentralization. Scalability is not simply a feature. It’s a fundamental ideological decision. As they say, you can’t have your cake and eat it too.

Since inception, the Ethereum Foundation has presented Ethereum as a “world computer.” While Ethereum is nominally a world computer, in practice it’s not because its performance limited. By making a different set of ideological trade-offs, Block.one is positioning EOS as a viable world computer that can scale from inception. At time of network launch, it’s expected that EOS-based blockchains will accomodate over 1,000 transactions per second (TPS), whereas Ethereum supports ~15 TPS. Moreover, Block.one has outlined a clear path by which EOS-based chains will scale to 10,000 TPS and beyond.

The Ethereum Foundation’s top priority is scalability. They are approaching scalability from many angles, most notably sharding and plasma. While these approaches are promising, neither is close to materializing. Early plasma implementations will only offer limited functionality, and will not support generalizable smart contracts. Sharding is much more complex, and will be a slow, multi-year roll out that introduces many breaking changes.

Thus, the bull case for EOS is that application developers want to build performant apps today, and that they will do so on the only viable blockchain that offers the performance they need.

The Bull Case: Usability

Dan Larimer, cofounder and CTO of Block.one, has previously built two application specific blockchains: BitShares and Steem. Relative to any Ethereum based application such as Cryptokitties, Peepeth, or Ethergoo, Bitshares and Steem offer far better user experiences. Although neither application went viral, both are still considered best-in-class blockchain based applications. They currently process more transactions per day than all other blockchains, including Ethereum. Larimer knows how to build blockchain-based software that meets the user experience expectations of consumers.

Larimer is bringing many of the innovations he pioneered in Bitshares and Steem to EOS. Although these features are not new ideas, they’ve never been implemented natively in a generalizable smart contract platform before. Let’s discuss three of them:

Most importantly, EOS transactions will be free for users. This is a massive breakthrough, enabling consumers to interact with the EOS blockchains dozens of times per day without worrying about paying fees. Consider a social media application in which you had to pay a fee for every picture, like, and comment. Or a game where you have to pay a fee for every move you make. Consumers would never adopt such a system.

EOS software also provides protocol-layer account recovery. The importance of this cannot be overstated. Many consumers are hesitant to purchase and hold large amounts of cryptoassets because they’re afraid of “what if I lose my password?” Although it’s possible to create backup-systems in Bitcoin and Ethereum using various multi-signature schemes, this process is clunky, unclear, and complex. On the other hand, EOS will provide native protocol-layer account recovery, ensuring that consumers can recover their funds even if they lose their password.

Lastly, EOS provides protocol-layer human-readable addresses. Unlike Bitcoin or Ethereum, in which users interact with one another using long strings of random letters and numbers, EOS will allow users to establish human-readable, persistent cross-application identity natively. This is what an ETH address looks like: 0xdbd838ae88d71bbd465d8f7ddf6b0c9156002d7e. This is what an EOS address looks like: @KyleSamani.

Again, both Bitcoin and Ethereum provide ways to try to create human-readable account names on top of their respective protocols, but neither has made this particularly easy for consumers. Block.one has prioritized making EOS easy to use out of the box.

This focus on usability will help expand the user base for EOS and makes this a compelling platform for developers to build on.

The Bull Case: Go-To-Market Focus

The Block.one team is, by far, the most well-capitalized team in crypto. It’s been estimated that they’ve raised over $2B through their ICO.

They’re aggressively investing that capital to catalyze the growth of the EOS ecosystem. Notably, Block.one has committed $1B to supporting ecosystem funds who commit to invest in EOS-based projects.

Additionally, Block.one is hiring senior business executives, forging partnerships with universities to establish EOS development courses, and is building out global developer-relations and government affairs teams.

Unlike many teams in crypto who tend to believe “if you build it, they will come,” the Block.one team is adopting many of the best go-to-market practices from traditional non-crypto businesses. They do not assume “if you build it, they will come,” and instead they’re actively and deliberately investing in their growth. Although many crypto evangelists scoff at the idea of raising massive amounts of capital to fund growth, we find this to be a refreshing and unique approach among a sea of crypto teams who have little prior go-to-market experience.

The bear case for EOS is, in simple terms, that it’s not meaningfully decentralized, and that ultimately will be its downfall. Moreover, EOS bears argue Ethereum’s network effect is unbeatable, and that the developer community surrounding Ethereum is too strong.

Let’s dive into each of these.

The Bear Case: EOS Is Too Centralized

EOS bears argue that everything about EOS is too centralized: the company building the software (Block.one), the cap of only 21 simultaneous block producers (whereas Ethereum has over 10,000 validators), the number of implementations (1 in EOS versus at least 4 in Ethereum), and the distribution of coins.

All of these criticisms are valid. EOS is in almost every way more centralized than Ethereum. But it’s not completely centralized in the way that Google and Facebook are.

In particular, the “EOS blockchains will be too centralized” argument tends to refer most frequently to the fact that the DPoS consensus algorithm that EOS employs will only support 21 simultaneous block producers.

Decentralization maximalists believe that blockchains must prioritize censorship resistance above all else. As Larry Sukernik details in this excellent essay, there are different levels of censorship resistance. The two most clear thresholds are sovereign-grade censorship resistance and platform-grade censorship resistance.

Decentralization maximalists believe that blockchains must be sovereign-grade censorship resistant. Block.one doesn’t claim that EOS will be sovereign-grade censorship resistant, but rather just platform-grade censorship resistant.

What’s the difference?

Sovereign grade censorship resistance means that the system must be designed to withstand direct attack from powerful, sovereign entities, namely governments. Platform-grade censorship resistance, on the other hand, simply means that there is no single platform operator who can censor one’s use of the system (e.g. when Twitter disabled API access to 3rd party developers).

Ultimately, decentralion maximalists argue that, because EOS block production will not be decentralized enough, that governments will attack it and ultimately shut it down, rendering it useless.

At Multicoin Capital, we find this view to be highly presumptuous. We simply don’t know how a global smart contract platform running on 21 block producers is going to perform. Rather than focusing on “when it’s successful it’s going to be attacked” we instead choose to focus on “let’s first make sure that people actually use it, making it something that’s even worth attacking.”

The Bear Case: Ethereum’s Network Effects and Community Are Too Strong

Ethereum bulls commonly argue that it’s too late for any other smart contract platform to catch up; that Ethereum’s network effects, developer community, brand, and ecosystem integrations are so ingrained, and accelerating so quickly, that another platform cannot possibly catch up.

Network effects are powerful. They are the reason that Microsoft, Google, LinkedIn, Amazon, Facebook, Apple, and other major technology companies have become so dominant in their respective fields. Once their network effects kick in, they become nearly unstoppable as no competitor can catch up.

Today, it’s estimated that there are on the order of 20 - 30M Ethereum users, and over 2000 unique tokens on the Ethereum blockchain. ICO teams have raised billions of dollars, and are using that capital to hire developers to build on Ethereum. By all accounts, Ethereum’s network effect is real, and the ecosystem is accelerating every day.

Moreover, many external ecosystems and parties have added Ethereum support over the last 2-3 years, including hardware/mobile/desktop wallets, exchanges, fiat on-ramps, custodians, and more. EOS has basically none of the above.

Ethereum bulls look at other competitive smart contract platforms like Neo, Qtum, and Cardano - which haven’t received nearly the community embrace that Ethereum has - and correctly declare that Ethereum’s network effect is crowding out the competition. Indeed, these competitive chains are struggling to get off the ground in a meaningful way even though they market themselves and their communities as more mature and developed than they are.

However, these other chains are far less credible than EOS. EOS is going to be Ethereum’s most credible competition to date. It has a real developer community, and will launch into much fanfare.

Conclusion

Ethereum was the first viable smart contract platform. It is by all accounts the dominant platform. As a result of its success, Ethereum is encouraging fierce competition. EOS is the most credible competitor to date, and is trying to asymmetrically compete with Ethereum by focusing on areas in which Ethereum is weak.

The multi-front war among the smart contract platforms is just beginning. It’s going to incredibly exciting to watch it play out.

I'm a prolific writer in the crypto space. Follow me on Twitter @kylesamani and subscribe to Multicoin's free research for some of the best insights in crypto.